Supply Chain Management

RATCH operates in various businesses from electricity generation and infrastructure to services that involve a diverse range of stakeholders. Paying attention to the management of all stakeholders throughout the business supply chain is thus a crucial factor for business success and sustainable growth.

The company is aware of the importance of supply chain management and gives it importance. The guidance on treatments of stakeholders are enshrined in the Code of Conduct that encompasses shareholders, employees, creditors, business partners, suppliers or vendors, competitors, the government sector, community, society and the environment.

The Company places importance on the governance of supply chain management by establishing the practices in the Company’s Code of Conduct endorsed by the Board of Directors and formally announced by the Chairman. The Corporate Governance and Sustainability Committee is responsible for ongoing overseeing and monitoring implementation of supply chain management and performance. Up to date, the Company has enforced compliance for the Supplier Code of Conduct to the Company's suppliers across the supply chain. The Company has also enhanced and refined its supplier screening and selection process by incorporating ESG considerations into supplier risk assessments. The progress and performance are regularly and orderly reported to the management, the Corporate Governance and Sustainability Committee, and the Board of Director, as well as disclosure made annually.

The supply chain involves with 4 main business stages: 1) Project development 2) Construction 3) Production and service and 4) closing a business. Success factors are business partners, suppliers, customers, community and the environment. The management approach for these stakeholders is set as follows:

Supply chain management targets

Management approach

RATCH has enforced the Supplier Code of Conduct B.E. 2566 (1^st revision) that embraces the UN Global Compact (UNGC)’s Supply Chain Sustainability practices, to ensure suppliers have operated in line with the Company’s intention in honoring business ethics, environmental stewardship and social responsibility. The intention supports the Company’s goal to take part in creating equitable and resilient society with a better care for the environment. RATCH schedules to review the Supplier Code of Conduct on an annual basis and in 2024, the review showed its contents remain consistent with universal practices and fully cover the issues material to the power generation business’ stakeholders. The key takeaways are as follows:

All suppliers are obligated to acknowledge and comply with the code of conduct, deemed a condition of the procurement process. In 2024, 271 suppliers have acknowledged the Supplier Code of Conduct and no violation was found.

Development of sustainable procurement protocol

RATCH has developed the Sustainable Procurement Protocol that integrates environmental, social and governance issues. The protocol serves as the framework for the screening, qualifying, assessing and evaluating the performance of suppliers, to ensure they operate with environmental and social concerns, business ethics and respect for human rights.

To have the Sustainable Procurement Protocol implemented effectively and systematically, the Company added the protocol into the Environmental and Social Management System (ESMS), identifying it as the procedure that relevant units shall follow. The oversight and performance assessment structure were clearly outlined.

Sustainable procurement procedure

Performance in 2024

Supplier Screening

The supplier screening involves 2 steps: supplier pre-qualification and supplier risk assessment.

• Supplier pre-qualification As the initial step of supplier screening, RATCH uses the supplier qualification form that covers environmental, social and governance aspects. It is the tool to identify if the suppliers have the desirable qualifications. All suppliers are required to fill up and return the forms to the Company.

  Supplier pre-qualification criteria
  1. Location and income	2. Anti-corruption and anti-bribery certification
  3. Certification relating to climate change management	4. Legal compliance
  5. Certification relating to safety and occupational health	6. Gift taking or giving policy
  7. Workplace safety and hygiene management	8. Anti-corruption policy
  9. Certification relating to human rights	10. Fair competition
  11. Human rights violation and discrimination	12. Mutual benefit with other bidders
  13. Child labor	14. Similar work experience
  15. Management of impacts on the environment and community	16. Blacklisting by government offices/private companies for job abandonment
  17.Responsibility to community and society	18. Political involvement or political support
  19. Certification relating to cyber security and information technology security	20. Close personal relationship with the Company’s executives and employees

• Supplier risk assessment

  Regarding supplier risk assessment, RATCH takes into account the risks related to business relevance and ESG, to identify whether the suppliers are critical suppliers, ESG high-risk suppliers or significant suppliers.

  

  Type of suppliers	Assessment criteria	No. of suppliers	%
  1) Critical suppliers	Business relevance such as spending value and non-substitutability of the product/service	216	16.81
  2) ESG high-risk suppliers	Supplier’s location (Country-specific risks) Supplier’s nature of business or industry (Sector-specific risks) Supplier’s product or service (Commodity-specific risks) Management of key ESG issues: Responses to climate change/greenhouse gas emissions Occupational health, safety and labor well-being Human rights Anti-fraud and corruption Cybersecurity	941	73.23
  Significant supplier summary
  Significant suppliers	Selected suppliers from the lists of critical suppliers and high ESG-risk suppliers, which show significant risks concerning the spending value and ESG risks that may cause impacts on the Company	991	77.12

  Note: Supplier screening depends on the assessment scores. The 15-points scale is divided into 3 levels, with 1 representing the lowest score and 15 the highest.

  Supplier group	No. of suppliers
  	RATCH	RGCO	RCO	RER	NNEG	BPC	SKB	HKP	SLT	Total	%
  Critical Suppliers	11	29	19	37	29	32	13	43	3	216	16.81
  High ESG-Risk Suppliers	96	53	127	138	198	125	106	88	10	941	73.23
  Significant Suppliers	98	71	132	142	200	131	112	95	10	991	77.12

  Note :	RATCH = RATCH Group PCL.	RGCO = Ratchaburi Electricity Generating Co., Ltd.	RCO = RATCH Cogeneration Co., Ltd.
  	RER = RATCH Energy Rayong Co., Ltd.	NNEG = Nava Nakorn Electricity Generating Co., Ltd.	BPC = Berkprai Cogeneration Co., Ltd.
  	SKB = Songkla Biomass Co., Ltd.	HKP = Hinkong Power Co., Ltd.	SLT = Solarta Co., Ltd.

• Supplier risk management

  RATCH has set guidelines on supplier risk management in accordance with the characteristics of a possible ESG risk, while ensuring suppliers’ compliance with the Supplier Code of Conduct to prevent and lessen the probability and impacts.

  Supplier risks	Risk management	Performance in 2024
  Response to climate change and greenhouse gas emissions
  Management of greenhouse gas emissions and waste	Check the environmental law violation records Consider suppliers with environmental management system or greenhouse gas inventory. Consider suppliers with publicly-announced targets on greenhouse gas management. Monitor suppliers’ compliance with Supplier Code of Conduct and evaluate their performance.	Set environmental criteria for supplier screening Cover environmental management aspect in Terms of Reference (TOR) and a clause of the supplier contract Establish criteria of supplier’s performance evaluation and 1,285 suppliers qualified No supplier violated environment regulations
  Occupational health and safety
  Occupational health and safety	Check suppliers' compliance with labor laws. Check suppliers’ safety records. Always arrange orientation and job risk assessment. Require the preparation of appropriate safety equipment in contracts. Require suppliers to provide insurance to workers with high-risk jobs. Monitor suppliers’ compliance with Supplier Code of Conduct and evaluate their performance.	Set safety and occupational criteria of supplier screening and assessment Provide job training for all suppliers involved with high-risk job before working Conduct job risk assessment and determine work safety measures No contractor/ subcontractors faced fatal accident
  Human rights
  Human rights violations (use of child labor/illegal migrant workers/discrimination/treatment of the vulnerable)	Check the records of labor complaint/dispute/ employment of illegal workers, child labor, and forced labor. Consider suppliers with publicly-announced human rights policy or rules. Require suppliers to provide information of workers assigned for the job Require suppliers to show migrant workers’ registration document or work permit. Monitor suppliers’ compliance with the Company’s Supplier Code of Conduct and evaluate their work conditions.	Set of human rights criteria for supplier screening and risk assessment Include human rights aspect in Term of reference (TOR) and a clause of the supplier contract Set criteria for evaluating suppliers' human rights performance and 1,285 suppliers reached the criteria. All suppliers conformed with relevant labor laws. No compliant related to human rights abuse
  Employment/compensation/working conditions
  Anti-corruption practices and governance
  Price collusion and conflict of interest	Identify it as a prohibited clause in Supplier Code of Conduct, that suppliers shall acknowledge and comply with. Check suppliers' information and background from various sources. Check suppliers’ Business Registration Certificate, and the lists of directors and executives. Refuse to hire suppliers on a blacklist. Monitor suppliers’ compliance with Supplier Code of Conduct and evaluate their performance. Invite suppliers to join Thai Private Sector Collective Action Against Corruption.	None involved price collusion No transaction with suppliers related conflict of interest 41 suppliers were invited to join in CAC’s anti-corruption declaration under CAC Change Agent scheme, of which 14 responded their acknowledgement.
  Job abandonment/ delivery failure/ sub-standard products and services	Set penalties and blacklist the suppliers failing to honor contracts. Set a clear termination clause in contracts and clearly explain it to suppliers. Set condition/criteria on advance payment and installment payment according to progress. Demand a guarantee for high-value jobs Monitor suppliers’ compliance with Supplier Code of Conduct and evaluate their performance.	27 suppliers underperformed and the Company informed them the evaluation result and recommendations for improvement
  Cybersecurity
  Protection of consumer data and consumer privacy	Consider suppliers with cyber security system for high-risk jobs. Check suppliers’ compliance with Personal Data Protection Act and their cyber security system. Apply the One-Trust platform to assess suppliers’ risks relating to personal data management. Check the records of cyberattacks and complaints concerning personal data/customer data. Set it a condition in contracts and monitor compliance. Monitor suppliers’ compliance with Supplier Code of Conduct and evaluate their performance.	Set of cybersecurity criteria for supplier screening and risk assessment Cover cybersecurity issue in Term of Reference (TOR) and a clause of the supplier contract No supplier caused of confidential information and personal data leakage No compliant concerning leakage of confidential information /personal data

  More Info:

  Supplier Code of Conduct

• Transparent procurement

  After the screening on qualifications and risks, qualified suppliers are enlisted for the procurement process. Under the Company’s regulation of supplies management and the Company’s order on supplies management guidelines, 4 procurement methods are identified and linked with the value and authorization required.

  Procurement methods	Procurement value
  1. Price negotiation	Worth no more than Baht 100,000
  2. Price inquiry	Worth no more than Baht 5 million
  3. Competitive bidding	Worth more than Baht 5 million
  4. Special procurement	Allowed in the following cases: Urgent cases or other cases approved by the Chief Executive Officer Specific product and service/task or services requiring special expertise Value more than Baht 100,000

  Note: Partial procurement with the objective to change the value and authorization required or the procurement method is prohibited.

  Authorization required	Value (Baht)
  Department head	≤ Baht 100,000
  Executive Vice President	≤ Baht 500,000
  C-Level (Function Head)	≤ Baht 1 million
  Chief Executive Officer	≤ Baht 30 million
  Board of Directors	> Baht 30 million

  The next step for selected suppliers is contract signing. The payment terms and conditions are clearly specified in the purchase agreement and suppliers know when to receive payments from the start. Generally, RATCH make payments within 30 days upon receiving invoices.

Supplier assessment

In assessing suppliers, RATCH has applied the Together for Sustainability (TfS) initiative and the requirements specified in the Supplier Code of Conduct. The assessment covers 5 aspects: business administration, environmental management, health and safety, labor and human rights and governance.

The assessment started with significant suppliers, conducted by desk review or on-site audit. In 2024, RATCH evaluated 148 suppliers. The assessment showed 148 suppliers comply with the Company’s requirements but need to improve their performance in the areas of GHG management, safety performance and compliance with the Company’s code of conduct.

Supplier performance assessment

In 2024, RATCH improved the supplier assessment form by adding the environmental and social aspect, aside from work quality and delivery. The unit requesting the procurement is in charge of assessing the work quality after delivery and then the procurement unit will assess the suppliers’ compliance with the contracts and the Supplier Code of Conduct. Suppliers will be informed of the assessment results for further improvement.

In 2024, RATCH engaged with 117 suppliers while RATCH operational-controlled entities had 1,637 suppliers (or 93.33%). The assessment showed that 27 suppliers (1.59%) failed the assessment criteria mainly involving payment conditions and transportation. RATCH notified these suppliers of the assessment results and recommendations for their improvements. Any supplier rejecting the recommendations will be recorded in the blacklist. Suppliers with passing scores will be included in the supplier list for future procurement.

Summary of Procurement in 2024

Suppliers of RATCH and controlled entities

The number of major suppliers of RATCH and the entities under its operational control totaled 10 in 2024, mostly catering services for the power generation, infrastructure and generation-related businesses. They can be classified as follows:

Of all suppliers, 634 won procurement deals for the first time in 2024 while the rest have been on the qualified supplier list.

Collaboration in environment, social and governance with suppliers

Promotion of ESG awareness

To promote good governance among the suppliers, in 2024 the Company led by the Procurement Division and Internal Audit Department shortlisted and invited 41 SME suppliers with unclear anti-corruption practice to participate in the network of Thai Private Sector Collective Action Against Corruption (CAC). The suppliers accepted the invitation will be guided by the Company in formulating anti-corruption policy and practices in line with CAC principles which is a basis for further application of CAC membership.

Promotion of innovation and knowledge

In 2024, Songkhla Biomass Co., Ltd., the Company’s joint venture, in collaboration with its supplier, CHM Engineering Supply Co., Ltd., has furthered the 2023 initiative on reduction of rubber tree root waste by separating rubber tree root from soil during the raw material preparation stage before entering the production process. It targets to decrease loss of rubber tree root from 20% to 5-10%. Since operating the sieve shaker to separate rubber tree root from soil for 2 months, the power plant gained additional rubber tree root as raw material of 134,780 kilograms, representing 2.5% of reusable rubber tree root waste (or equivalent to 15% per year). Additionally, it helps reducing cost of waste disposal and greenhouse gas emission from waste transportation and disposal process. For moving forward to achieve the initiative’s target, the power plant and its supplier is ongoing to enhance efficiency of the sieve shake.

Supplier ESG Programs

In 2024, RATCH’s procurement team attended two online supplier ESG programs:

1. Sustainable Supply Chain Management and
2. ESG 101: Basics of Sustainability.

These ESG programs were established by the Stock Exchange of Thailand (SET). The trainings aimed to enhance knowledge and understanding of basic sustainability principles as well as supplier ESG risks and management.